BP posts $6.3 billion loss, warns of more layoffs ahead

HOUSTON — The CEO of BP says the ongoing oil slump and other pressures are prompting it to cut deeper in places like Houston and Aberdeen, with its restructuring charges related to layoffs climbing to about $1.5 billion by the end of the year. That’s up from its December estimation of $1 billion.

“We will continue to identify more opportunities for simplification and efficiency,” and the rise in restructuring charges “reflects a faster pace” of cost-cutting across the company, BP CEO Bob Dudley told investors in a conference call Tuesday.

“There are further gains (to be made), we’re sort of well into restructuring costs in the upstream and plan to continue later this year,” he said. “Certainly it’ll be in some of our big centers around the world — Houston, some more in Aberdeen.”

BP Chief Financial Officer Brian Gilvary noted the company’s restructuring efforts started on the corporate side two and a half years ago, where it saw significant headcount reductions in both employees and contractors.

“You’re also seeing significant headcount reductions in upstream and downstream as we progress through the year and I think you’ll see more of that before we get to the end of the year,” Gilvary said.

BP’s upstream staff is 8 percent smaller than it was in 2013, when it began selling off assets and streamlining operations, and other corporate support staff is 37 percent smaller, he said. The company took a $270 million restructuring charge in the second quarter, bringing its charges to $920 million since the October-December period. Its total cash cost so far this year have come in $1.7 billion lower than this time last year.

BP lost $6.3 billion in the second quarter amid the ongoing oil slump and as it took charges on its recent Deepwater Horizon oil spill settlement with the U.S. government and Gulf states.

The London-based oil major’s second-quarter loss of 34 cents a share was down from a replacement cost profit, which is essentially the same as the net income of U.S. companies, of $3.2 billion, or 17 cents a share, in the same period last year. Revenues fell to $61.8 billion from $95.8 billion.

Dudley noted BP has “held the view for a long time that oil prices will be lower for longer,” but project costs are expected to decline 20 percent to 30 percent.

BP’s Deepwater Horizon settlement, which has yet to be ratified by a federal judge, brought the company $9.8 billion in pre-tax charges in the April-June period. That brings BP’s expected oil spill costs to about $54.6 billion. U.S. District Judge Carl Barbier ordered the company on Monday to begin processing payments – which are set to total $1 billion – to local governments in 30 days.

“The external environment remains challenging, but BP moved quickly in response and we continue to do so,” Dudley said in a written statement, noting this month’s slide in oil prices amid the ongoing supply glut and Iran’s nuclear deal with the west.

“Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the Group and we continue with capital discipline and divestments,” he said.

BP said it now expects to spend less than $20 billion for the full year. It spent $9.1 billion in the first half of the year and has sold off $7.4 billion in assets, part of its plan to divest $10 billion in assets by the end of the year.

The company also announced a it expects to pay investors a quarterly dividend of 10 cents a share in September.

BP also saw earnings fall because of lower return on its 19.7-percent stake in Russia’s state-owned Rosneft and an exploration write-off in Libya. Its income from Rosneft fell to $510 million in the second quarter, down from $1 billion the same period last year.

BP’s downstream unit made gains while its upstream business continued to feel the impact of the oil slump. Its downstream unit collected $1.9 billion in profit compared with $700 million last year, as refining margins increased on cheaper feed stock.

Its upstream business sank, with profits coming in at $500 million, own from $4.7 billion last year. It fell because oil prices were less than half what they were last year and because it took nearly $600 million in an exploration write-off and other costs in Libya.